Fathom (FTHM) Q2 2025 Earnings Call August 12, 2025 05:00 PM ET Speaker0Good afternoon and welcome to Fathom Holdings Second Quarter twenty twenty five Conference Call. Joining us today is the company's President and CEO, Marco Fresenal and Vice President of Finance, Daniel Weinman. Before I turn things over to management, I want to remind listeners that today's call may include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statem ...

Fathom Holdings (FTHM) Conference Call Summary Company Overview - Fathom is a real estate technology company providing a comprehensive solution for residential and commercial real estate, including brokerage, mortgage, title, and SaaS offerings [3][4] - The company operates in 43 states with plans to expand to five additional states in 2024 [4] Financial Performance - Q1 revenue grew by 32%, transactions increased by 26%, and agent growth was 22.8% [4][31] - Significant investment of approximately $20 million in proprietary software [4][22] - The acquisition of My Home Group in November 2024 added 2,200 agents and $100 million in revenue, expected to contribute $1.2 million in EBITDA in 2025 [4][28][29] Unique Business Model - Fathom's model differs from traditional brokerages by allowing agents to retain a larger portion of their commissions, charging a flat annual fee of $700 plus a transaction fee [11][12] - The company offers a concierge-level service and a virtual business model, which enhances agent support and efficiency [7][10] Technology and Efficiency - Fathom owns all its technology, which includes an ERP-like system for managing transactions and agent operations [18][19] - The direct cost per transaction is less than $270, significantly lower than competitors [19][26] - The Elevate program, launched recently, aims to provide agents with comprehensive support, potentially increasing gross profit per transaction by four times [14][15][26] Growth Strategy - Fathom aims to reach approximately 100,000 agents in the U.S., currently having around 15,000 [27] - The company anticipates organic growth to return to 15% and total growth (including acquisitions) to reach close to 30% [50][61] - The Elevate program is expected to generate approximately $1 million in EBITDA for every 100-120 agents [15][73] Ancillary Services - The mortgage business grew by 15% year-over-year, while the title business grew by 61% in Q1 [25][74] - Fathom aims for 50% of its ancillary business to come from non-Fathom agents, currently at over 60% [75] Market Position and Competition - Fathom is the tenth largest real estate company in the U.S. in a highly fragmented market with around 80,000 brokerages [9][60] - The company is not focused on competing directly with large mortgage companies like Rocket Mortgage, as it operates differently and relies on Fathom agents for business [54][55] Future Outlook - The company expects to achieve adjusted EBITDA positivity in Q2 2025, driven by cost reductions and growth in ancillary services [57][58] - Fathom plans to continue expanding its footprint and exploring acquisition opportunities in the fragmented real estate market [33][61] Management and Governance - The leadership team has extensive experience in real estate and technology, with a strong board of directors supporting growth initiatives [34][36] Additional Insights - Fathom divested from its insurance business to focus on higher growth opportunities, achieving a 32% growth rate in its core business [78] - The company has implemented AI solutions to enhance efficiency and reduce costs across various operations [51][52]

Financial Data and Key Metrics Changes - Total revenue increased by 32.1% to $93.1 million compared to $70.5 million in the same period last year, exceeding analyst expectations by approximately 12% [6][17] - Brokerage revenue rose nearly 36% to $88.9 million from $65.4 million last year, with gross profit improving to $8.1 million, a 13% year-over-year increase [6][7][8] - GAAP net loss for Q1 2025 was $5.6 million or $0.24 per share, compared to a loss of $5.9 million or $0.31 per share in Q1 2024, reflecting cost-saving efforts [19] Business Line Data and Key Metrics Changes - The brokerage business closed approximately 9,715 real estate transactions, a 26.1% increase from 7,703 transactions in Q1 2024 [20] - Mortgage revenue increased by 13% to $2.6 million from $2.3 million in Q1 2024, while title business revenue rose 43% to $1 million from $700,000 [14][23] - Adjusted EBITDA for the real estate division improved to approximately $1.6 million in Q1 2025, up from $800,000 in Q1 2024 [21] Market Data and Key Metrics Changes - Housing inventory increased by 16% in California, 20% in Utah, 28% in Colorado, and 18% in Georgia, indicating a shift towards a more balanced market [13] - Average home prices dropped year-over-year by 2.4% in Florida, 4% in Colorado, 8% in Kansas, and 5% in Illinois, reflecting market adjustments [14] Company Strategy and Development Direction - The company is focused on three core drivers for long-term profitability: expanding revenue through strategic growth, enhancing gross margins via agent programs like Elevate, and maintaining cost discipline [25][27] - The Elevate program aims to enhance agent productivity and profitability, with over 120 agents signing up shortly after its soft launch [9][10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism despite ongoing economic headwinds, stating that the company is well-positioned to benefit from improvements in market activity [4][14] - The company expects to achieve adjusted EBITDA profitability in Q2 2025, marking a significant milestone [5][27] Other Important Information - The company ended the quarter with a cash position of $8 million, including $2.7 million in net proceeds from a public offering [24] - Cost-cutting initiatives are projected to reduce expenses by approximately $750,000 per quarter going forward [5] Q&A Session Summary Question: Can you elaborate on how Elevate enhances profitability on gross profit and adjusted EBITDA per transaction? - Management indicated that the Elevate program is expected to increase gross profit margins by three to four times compared to traditional programs due to the efficiency of the platform [31][34] Question: Have discussions with similar-sized agent teams accelerated post-launch of Elevate? - Management confirmed increased conversations with various brokerages and technology partners since the launch of Elevate, indicating potential partnerships and licensing opportunities [36][37]

Financial Data and Key Metrics Changes - Total revenue increased by 32.1% to $93.1 million compared to $70.5 million in the same period last year, exceeding analyst expectations by approximately 12% [7][17] - Brokerage revenue rose nearly 36% to $88.9 million from $65.4 million year-over-year [8][17] - Gross profit improved to $8.1 million, a 13% increase year-over-year, with a 34% growth excluding divested Daggle Insurance [8][17] - GAAP net loss for Q1 2025 was $5.6 million or $0.24 per share, compared to a loss of $5.9 million or $0.31 per share in Q1 2024 [20] Business Line Data and Key Metrics Changes - The brokerage business closed approximately 9,715 transactions, a 26.1% increase from 7,703 transactions in Q1 2024 [21] - The Real Estate Division's revenue was approximately $88.9 million, a 36% increase attributed to the addition of My Home Group [22] - Mortgage revenue increased by 13% to $2.6 million from $2.3 million year-over-year [15][24] - Cyto revenue increased by 43% to $1 million from $700,000 in Q1 2024 [16][24] Market Data and Key Metrics Changes - Housing inventory rose by 16% in California, 20% in Utah, 28% in Colorado, and 18% in Georgia, indicating a shift towards a more balanced market [14] - Average home prices dropped year-over-year by 2.4% in Florida, 4% in Colorado, 8% in Kansas, and 5% in Illinois [15] Company Strategy and Development Direction - The company is focused on three core drivers for long-term profitability: expanding revenue through strategic growth, enhancing gross margins through agent programs like Elevate, and maintaining cost discipline [26] - The Elevate program aims to enhance agent productivity and drive long-term profitability, with over 120 agents signing up shortly after its soft launch [9][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism despite ongoing economic headwinds, stating that the results reflect discipline and execution [6] - The company expects to achieve adjusted EBITDA profitability in Q2 2025, marking a significant milestone [7][26] - Management remains cautious about broader market volatility but is encouraged by current momentum [27] Other Important Information - The company has reduced expenses by approximately $750,000 per quarter going forward [6] - The cash position at the end of the quarter was $8 million, including $2.7 million in net proceeds from a public offering [25] Q&A Session Summary Question: Can you elaborate on how Elevate enhances profitability? - Management indicated that Elevate's structure allows for a higher gross profit margin per transaction, potentially growing by three to four times compared to traditional programs [32][33] Question: Have discussions with similar-sized agent teams accelerated post-Elevate launch? - Management confirmed increased conversations with various brokerages and technology partners since the Elevate launch, indicating potential partnerships and licensing opportunities [36][38]